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State Airports Fund Balance

MnDOT Policy FM012
View/print signed policy (PDF)

Policy statement

Policy is needed to provide an appropriate level of reserve to protect against major fluctuations in revenue. State statutes do not require that a specific balance be maintained in the state airports fund, but a sufficient amount should be maintained to avoid a deficit in the fund at the end of a biennium. Therefore, setting an appropriate amount for the unreserved, undesignated fund balance is an important management decision that the statutes reserve for the Commissioner.

The state airports fund should maintain an undesignated, unreserved fund balance of:

  • not less than 5% of total appropriations
  • not more than 15% of total appropriations
  • not more than $3 million

If any forecast projects that the fund balance target will not be met, MnDOT will propose mitigating actions. Potential actions include:

  • Adjustments to airline flight property tax
  • Supplemental budget submissions
  • Postponement or acceleration of grant applications and awards
  • Modifications of local contribution rates

These steps should be taken by the end of the biennium, unless the Commissioner finds that an emergency warrants a longer period of adjustment.

Reason for policy

As described in the definition of fund balance, the amount of estimated revenue is a major factor in determining the estimated fund balance. The revenue used to calculate a fund balance is always based on a mixture of estimated and actual revenue for a given accounting period. Although unlikely, events could occur to substantially affect the receipt of actual revenue, such as airline bankruptcies, disruption of petroleum supply, or substantial economic recession.

Who needs to know this policy

The Commissioner and Deputy Commissioner need to be aware of this policy, because it provides a policy constraint in budget deliberations. The Chief Financial Officer and the Office of Financial Management Director, along with his/her direct reports need to fully understand the policy and how to implement it. The Division Directors, Government Affairs Director, and Aeronautics Director must read and understand the policy and its budget implications.

Procedures

In conjunction with Minnesota Management & Budget’s annual budgeting process prescribed at Minnesota Statutes 16A.103, the MnDOT Budget Director and staff, in cooperation with Aeronautics staff, prepare a formal fund statement for the state airports fund in November and February every fiscal year.

The fund statement covers the current fiscal years and either three or four fiscal years into the future. A fund balance is calculated as part of preparing each of these statements. This statement provides the basis for evaluating the fund balance and any budget proposal under consideration in conjunction with this policy. In addition, MnDOT’s Office of Financial Management prepares ongoing, unofficial financial statements and, in conjunction with Minnesota Management & Budget, year-end formal financial statements. The fund statements are viewed to see if any major changes in the fund balance have occurred.

Trends related to external factors that might affect future revenues are also regularly monitored by both the Aeronautics and Budget staffs.

Definitions

Airline Flight Property Tax

The airline flight property tax is paid to the state airports fund by the airlines in lieu of other property taxes on “flight property,” as defined in Minnesota Statutes 270.071 to 270.079. The overall amount of the tax is determined each year by MnDOT and is calculated as the difference between the total appropriation to the state airports fund by the legislature and the estimated revenues to the airports fund from all other sources, plus an additional allowance for contingencies.

Fund Balance

The amount of estimated and actual revenue either projected or actually received by the state airport fund for a given fiscal year, less appropriations (made by legislature or through statutory provisions), or if after the end of a fiscal year, actual revenue minus the total amount of expenditures plus remaining encumbrances. For years beyond which appropriations are made, the fund balance is the estimated future revenues minus the amounts of expenditures, reserves, and other uses of revenue in the fund, projected for the end of a fiscal year. Revenue includes aircraft registration tax, aviation fuel tax, aircraft sales tax, airline flight property tax, and interest on invested state airports fund monies and other miscellaneous revenues.

State Airports Fund

The state airports fund is the operating fund for the MnDOT Office of Aeronautics as specified by Minnesota Statutes 360.017. It is a governmental fund that accounts for public monies used to acquire, construct, improve, maintain, and operate airports and other navigational facilities; to assist municipalities to do the same; to promote interest and safety in aeronautics; and to pay salaries and expenses of MnDOT related to aeronautical planning, administration, and operation.

Responsibilities

Commissioner

  • Ensures that an appropriate fund balance is maintained in the State Airports Fund.

Chief Financial Officer and designees

  • Ensures that the budget process provides appropriate information to the Commissioner and the Aeronautics Director, to meet the obligations of this policy.

Director, Office of Aeronautics

  • Follow this policy to ensure that an appropriate fund balance will be maintained.

Frequently asked questions

Q: How many airports receive State Airport Funds?

A: There are 135 publicly- owned and publicly- funded airports that receive these funds.

Q: What is the basis of the level of the state airports fund balance recommended in this policy?

A: There is volatility to some degree in all of the principal revenue sources for the state airports fund. Recent changes to statute have increased uncertainty in the fund forecast. The amounts recommended in this policy are established to ensure sufficient funding is available for MnDOT operations and key aviation navigational systems.

Q: What factors might affect the size of the fund balance during the course of a year or biennium?

A: The primary factor is the possibility of actual revenues being different than the estimated amounts. If revenue is less than forecasted and the estimated spending is not changed, the fund balance will be lower that the forecasted amount. In recent years, other factors that have affected the size of the fund balance have included airline bankruptcies and the use of the state airport fund to balance the general fund.

History of policy updates or amendments

Not applicable, new policy.

Ownership

Responsible Senior Officer

Tracy Hatch
Deputy Commissioner/COO/CFO
tracy.hatch@state.mn.us
651-366-4811

Policy Owner

Duane Leurquin
Director, Financial Management
duane.leurquin@state.mn.us
651-366-3165

Policy Contact

Cassandra Isackson
Director, Aeronautics
cassandra.isackson@state.mn.us
651-234-7210